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Thursday, January 10, 2008

Russia Inflation December 2007

Russia's inflation rate rose in 2007 to the highest in four years in December as the government proved unable to put a brake on food prices and wages even while investment soars. The rate for the year rose to 11.9 percent from 9 percent in 2006, the first time that the rate has surpassed the previous year since 1998, the Moscow-based Federal Statistics Service Rosstat said today. Consumer prices rose 1.1percent in December, compared with a 1.2 percent advance in November.

Russia, the world's biggest energy exporter, has struggled to curb inflation as record oil income has boosted salaries and global food prices have increased. In an attempt to try to stop the upward march of food prices the government cut dairy and vegetable oil import duties, sold grain from state reserves and added a grain export duty. A number of companies even agreed in October to freeze prices on some milk, vegetable oil, egg and bread products until Jan. 31.

Food prices rose a monthly 1.6 percent, compared with 1.9 percent in November. Food price growth was led by fruit and vegetable prices, which slowed from November's rate of 6.2 percent to 5.6 in December, according to the statistics service.

The Organization for Economic Cooperation and Development said in a December report that the Russian government's ``massive additional spending'' before elections also helped push up inflation.

Legislators approved additional budget outlays this year as the nation prepared to hold parliamentary elections on Dec. 2 and a presidential vote in March 2008.

Again, my attempt at explaining why all this is happening, and why it is happening right now, can be found in my in depth analysis of the Russian inflation problem.

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